QUANTUM GRAPHITE LIMITED — Capital/Financing Update 2015

May 12, 2015

ASIA PACIFIC I EUROPE I NORTH AMERICA

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13 May 2015

Dear Shareholder

Renounceable Rights Issue

On Thursday 7 May 2015, Valence Industries Limited (ASX:VXL) (Valence) announced a 1 for 6 renounceable pro rata entitlement issue at 29 cents per new Valence share, together with one (1) free attaching listed option (in the same class as the existing listed options) for every 2 shares subscribed for ( Rights Issue ).

The issue price of 29 cents per new share represents a discount of approximately 19.7 % to the 5 day volume weighted average closing price of Valence shares up to and including Thursday 30 April 2015 (being the last trading day prior to announcement of the Rights Issue).

The Rights Issue is seeking to raise approximately A$9.4 million (before costs and expenses of the offer). The net funds raised by the Rights Issue will be applied towards:

• Completion of 2015 drilling, assay and metallurgy program

• Construction of scalable tailings facilities and process water return systems

• Completion of existing plant commissioning

• Preliminary engineering and design for production expansion

• Costs of the Placement, Rights Issue and First Debt Facility (see ASX announcement on 7 May 2015); and

• Working capital requirements

The Directors are pleased that you will be offered the opportunity to participate in this capital raising to fund Valence’s exciting expansion and development. We are hopeful that you will continue your loyal support of Valence.

w w w . v a l e n c e i n d u s t r i e s . c o m 60 Hindmarsh Square I Adelaide I South Australia I 5000 I Australia p: +61 8 8215 6400 I e: info@valenceindustries.com ABN 41 008 101 979

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Key Terms of Rights Issue

In accordance with the requirements of the ASX Listing Rules, the following information on the Rights Issue and Valence is provided.

	Terms of issue of	 New shares will rank equally in all respects with the existing class of	 New shares will rank equally in all respects with the existing class of	 New shares will rank equally in all respects with the existing class of	 New shares will rank equally in all respects with the existing class of	 New shares will rank equally in all respects with the existing class of	 New shares will rank equally in all respects with the existing class of
	securities	quot	ed fully paid ordinary	shares on issue.
		 New liste	options will rank equ options (exercisable	ally in all respects wit at 25 cents subject t	h the existi o the adjus	ng class of tment
		form	ula in Listing Rule 6.2	, 2.2, and expiring at 5p	m (AEST)	on
		31 Ju	ly 2016).
	Record Date	The reco	rd date for determini	ng entitlements is 7:0	0pm (AEST	) on
		Monday	18 May 2015.
	Fractional	Any fract	ional entitlements wi	ll be rounded up to th	e nearest	whole
	entitlements	number.
	Renounceable	The Righ	ts Issue is renounceab	le. This means that if	you do no	t wish to
		accept al that part	l or part of your entit of your entitlement t	ement under the Rig hat you do not wish t	ts Issue yo o accept ei	u may sell ther on ASX
		or off-ma	rket during the rights	trading period to a t	hird party	who need not
		be anoth	er Shareholder of Val	ence.
	Eligibility	Only sha	reholders with registe	red addresses in Aust	ralia or Ne	w Zealand as
		at the re	cord date will be eligi	le to participate in t	e Rights Is	sue.
	Fees	 The L	ead Manager will rec	eive a fee in connecti	on with the	Placement
		and total	he Rights Issue of a c amount raised under	ash amount equal to the Placement and 4	60,000 pl .0% raised	s 6.0% of the under the
		Right	s Issue.
		 No h beha	andling fees will be p lf of security holders.	aid to brokers who lo	ge accept	nces on
		The max	imum number of new	shares to be issued	under the	Rights Issue is
	Maximum number of securities to be	32,299,9	41 and the maximum	number of new opt 1	ions to be	issued under
	issued	the Righ the max	s Issue is 16,164,971 imum number of sh	. This means that fo ares on issue will b	llowing th e 226,309	e Rights Issue, ,585 and the
		maximu	m number of options	on issue will be 97,1	57,9912wit	h 71,907,9923
		of those	being quoted on ASX.
	Dividend Policy	Valence dividend	oes not have a divid in the near future.	nd policy and does n	ot intend t	o declare a
	Shareholder approval

1 based on the undiluted share capital of Valence as at the close of trade on 6 May 2015, without taking into account the impact of rounding, but also taking into account the placement of 7,117,665 shares announced on 7 May 2015, which will be issued before the Record Date.

2 As above

3 As above

w w w . v a l e n c e i n d u s t r i e s . c o m

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Full details of the Rights Issue are set out in the Prospectus and Appendix 3B lodged with ASIC and ASX on Thursday 7 May 2015. The Prospectus is available to download from both the ASX website (at www.asx.com.au) and Valence’s website (at www.valence industries.com) and is expected to be sent out to shareholders on Thursday 21 May 2015.

You are encouraged to read the Prospectus in full before making a decision in respect of the Rights Issue. To accept all or part of your entitlement under the Rights Issue you will need to complete the acceptance form that will accompany the Prospectus to be sent to shareholders.

Valence will not be sending an offer under the Rights Issue to any shareholder who does not have a registered address in Australia or New Zealand as at the record date.

Indicative Timetable

The anticipated timetable for the Rights Issue is as follows:

The anticipated timetable for the Rights Issue is as follows:
EVENT	DATE
Announcement of Rights Issue– announcement of Rights Issue	Thursday 7 May 2015
Lodgement of Prospectus– Prospectus lodged with ASIC and ASX and ASX Appendix 3B lodged with ASX	Thursday 7 May 2015
Notice to Shareholders– notice sent to Shareholders containing information required by Appendix 3B	Wednesday 13 May 2015
Ex date	Thursday 14 May 2015
Rights trading commences– the date on which Shares commence trading without the entitlement to participate in the Rights Issue and Rights trading commences	Thursday 14 May 2015
Record date– the date for determining entitlements of Shareholders to participate in the Rights Issue	7:00pm (AEST) Monday 18 May 2015
Prospectus sent to Shareholders– despatch of Prospectus and Entitlement and Acceptance Forms – Rights Issue opens for acceptances	Thursday 21 May 2015
Last day of Rights trading	Thursday 4 June 2015
Securities quoted on a deferred settlement basis	Friday 5 June 2015
Last date to extend Closing Date	Tuesday 9 June 2015
Closing Date– The last day for receipt of acceptance forms	5:00pm (AEST) Friday 12 June 2015
Shortfall notification date	Wednesday 17 June 2015
Issued date– Allotment of New Shares. Deferred settlement trading ends	Friday 19 June 2015
Expected commencement of normal trading in New Shares (and New Options, if admitted to quotation) on ASX	Monday 22 June 2015

w w w . v a l e n c e i n d u s t r i e s . c o m

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Valence reserves the right to amend this timetable subject to the ASX Listing Rules.

If you have any queries about the Rights Issue, you should consult your stockbroker or other professional adviser or contact Valence’s Share Registry, Link Market Services Ltd, on +61 1800 009 918 (toll free within Australia).

Yours sincerely,

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Jaroslaw (Jarek) Kopias Company Secretary

w w w . v a l e n c e i n d u s t r i e s . c o m